This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the "Reprints" link at the bottom of any article.

Learning to Speak Your Client’s Language

Four common cultural issues advisors should be aware of

The best financial advisors know how to tune into each client’s money history and individual story. This includes their cultural heritage—one of the most important factors in determining who we are around money. The more familiar you are with major themes and issues represented in various ethnic groups, the better you’ll be able to understand where your clients are coming from and know how to speak to and educate them in a way they can comprehend and assimilate.

In 2008, I discussed many of these cultural issues in depth in two articles for Investment Advisor, “Minority Report” (July 2008) and “Minority Affairs” (August 2008). Enough water has passed under the bridge since then that it makes sense to update that summary.

“My client keeps his wife in the dark about their financial affairs.”

In 2008, we discussed this macho attitude toward money as a characteristic of Hispanic culture. But according to Naguib Kerba, branch manager at Investment Planning Counsel in Mississauga, Ontario, it’s not unusual among older immigrants from Mediterranean cultures as well.

“Among people who are 45 or older and from the old country (Italian, Egyptian, Spanish), the guy measures who he is by the job he’s got,” Kerba says. “He handles the money and makes the big-ticket decisions. In some cases, he is willing to exclude his wife from the discussions.”

How should an advisor handle this? In general, Kerba insists on the wife being there. “Quite often, she trusts [the husband], is quite agreeable to his terms and isn’t interested in being there. But I have a legal obligation to make sure she’s informed.”

He reminded me that this head-in-the-sand attitude is found among younger women, too. “My brother’s wife, who is Canadian of Irish descent, has absolutely no interest in managing money. She trusts him so implicitly to make all the decisions that he’s more than willing to forge her signature. I have my assistant go to their house to make sure she signs the documents herself.”

Raoul Rodriguez Walters, president of Mexico Advisor in Portland, Ore., works with many clients with south-of-the-border backgrounds. Among older Mexican clients, he told me, it’s usually the man who’s involved in the finances.

“Most of the time, the wife doesn’t know what’s going on and delegates everything to her husband,” he says. “There are occasions when I have to explain why it’s important that they both be involved in the process—for example, they have separate wills and accounts—and sometimes they come around.”

In other situations, Rodriguez will ask the wife to sign a form saying that she’s OK with not being present at meetings and surrendering financial decision-making to her husband.

Decide what kinds of situations you’re willing to take on. If a client’s attitudes make you too uncomfortable to do good work, the best solution may be to refer that client to another advisor.

“My client wants to put all his money in real estate and avoid the stock market.”

After a market meltdown that left individual portfolios struggling to regain the value they held years ago, most advisors know about dealing with shell-shocked clients. But sometimes the bias is based on culture, not trauma.

In Ontario, Kerba reports, “a lot of people from Italian or Portuguese backgrounds believe in real estate being the be-all and the end-all. They’ll work really hard to pay off the mortgage on the house, then buy a second house, or a house for a child, and work hard to pay off that mortgage. It’s not unusual for me to see a client who has two or three houses and very little savings.”

Kerba points out that the challenge for these clients will be at retirement. He predicts, “They will need to sell some of their assets or go into debt, which is foreign to them.”

Home equity has traditionally represented wealth in Mexico too, Rodriguez told me. “Home is a tangible investment, whereas equities feel too risky to [Mexican clients], simply because the markets aren’t that well developed in Mexico.” When they come to the States, there may be a real need to educate and inform these clients about risk and returns. “We try to educate them about the fact that the market over time has outperformed real estate,” Rodriguez says. “If they have 401(k)s, we try to get them to invest as much as possible. We try to get them to diversify.”

Louis Barajas, owner of Louis Barajas Wealth Planning in Santa Fe Springs, Calif., points out that some Latino clients need to be coached about taking charge of their own retirement security. “A lot of Latinos think they’re going to retire on Social Security and their company will take care of them,” he says.

In situations like this, Barajas emphasizes, abstract charts and graphs won’t change client attitudes. “Numbers, asset allocation, they don’t get it. But once you share stories, people can understand that.”

“My clients feel their kids’ education is more important than saving for their own retirement.”

Unlike our society which emphasizes financial independence, some cultures feel it’s more important to help needy members of the family. To that end, children’s education is considered a more important investment than the parents’ own savings.

“You never tell an Asian family that they are saving too much for education,” says Rita Cheng, a financial advisor with Ameriprise Financial Services in Bethesda, Md. “While it’s important to save for retirement, if you don’t provide a solid education for your child, you have failed as a parent.”

Cheng has had to educate some of her professional colleagues about this cultural difference. “Asians don’t view education as an expense,” she says. “It is an investment, because children represent the future of the family. If you saddle your kids with education debt, it means you didn’t plan and weren’t willing to sacrifice for the next generation.”

Such attitudes and traditions run deep. In some cases, you will need to have a strategy or position that lets you serve them well even if they don’t share your perspective.

“Prospects don’t understand what a financial advisor can do for them.”

Often, the first thing a prospect from another culture needs to know about you is what you do. “People don’t understand what a CFP is,” Barajas says. “There’s no word for what I do in Spanish.”

Educational outreach is necessary in situations like these, but can be difficult and slow. So far, Barajas admits, “Most people who come to me are referrals” from existing clients.

You don’t have to know your clients’ cultures inside out, says Cheng. What’s important is respect for each other’s values. “One of the reasons why clients value my expertise and judgment is because they know I don’t gossip or violate client confidentiality,” she observes.

Be prepared, however, for these clients not to share all their financial information. “A lot of ethnic groups won’t tell you as much as an American client might divulge,” notes Kerba, who works with Estonian, German and mixed-background Canadian clients.

“It’s more important for them to deal with someone they know and trust,” Kerba sums up. “Family or friendship connection is much more valuable than a referral to a stranger.”

In your work with clients from other cultures, building trust requires a crucial combination of patience, sensitivity, open communication and transparency. Though developing these relationships may not be for the faint of heart, you’ll find the work of helping your clients secure their financial future to be both fascinating and satisfying.

ThinkAdvisor's TechCenter is an educational resource designed to give you a competitive edge by keeping you abreast of new tech innovations and need-to-know information that can be applied to your business.